In today’s Creating Wealth Show, Jason Hartman invites Jerry Robinson, author of Bankruptcy in Our Nation, to the show to share his views about what bankruptcy would look like. They discuss a variety of topics and consider frankly just how bleak America’s future could look. Robinson also gives his opinion on the impact of America’s international relations, as well as posing the interesting notion that we can see the path of America’s future by looking at the past of the rest of the world.
Key Takeaways
03.50 – Negotiating certain aspects of the deal with your property manager is always worth a try.
10.00 – Jason reads through some of the latest listener reviews from iTunes. Is yours there?
22.40 – Jerry Robinson’s Bankruptcy of Our Nation deals with facets of the economic crisis such as what happened, why it happened and what we thought would happen.
25.00 – In a number of ways, the 2014 picture we draw now looks very similar to the state of the world in 1914.
33.47 – No-one does anything for nothing. A closer look at the incentives can provide a lot of insight.
38.00 – The psychological impact of the economy is already taking an effect. People now expect prices and values to go up, and are surprised if they don’t.
46.06 – Maybe we need to reassess our definition of evil to better match today’s global situation.
50.15 – If the relationship between the US and Saudi Arabia changes, it could change the entire balance of power in the Middle East.
52.04 – Exports are always going to be vital, and we need to consider the impact if the US becomes energy-independent.
1.00.34 – International threats, and especially those involving cyber-attacks, must be taken seriously. Even if you’re living in a city, know the precautions you can take.
01.04.00 – Find out about Jerry Robinson’s Five Levels of Financial Freedom at https://followthemoney.com/fivelevels/
01.10.08 – With mortgage debt, as an investor you don’t even need to pay this off yourself – your tenants pay it off for you.
Mentioned in this episode
www.zillow.com
Bankruptcy of our Nation by Jerry Robinson
Tweetables
Every problem in real estate can be solved by simply lowering the price.
So many people today try to formulate a solution to problems they don’t even fully understand.
Can we ever have peace as long as the Central Bankers run the world? Are they so money-focused?
Transcript
Introduction:
This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit www.HartmanMedia.com
Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing. Fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years, and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it, and now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman:
Welcome to the Creating Wealth Show, this is your host, Jason Hartman and this is episode number 447. Thank you so much for joining me today, and also, thank you so much for all of the great reviews. I got scolded by one of our listeners the other day that I hadn’t read his review on the air, so I promised I would share some of these reviews. I just want to do this real quickly, so I won’t take a long time. I really do appreciate you writing reviews on iTunes and Stitcher Radio. With this kind of thing, of course, we love your business and we love making money, but it’s also just great to know that this advice matters.
We’ve had so many great thought leaders and experts on the show – by the way, the one today is Jerry Robinson, who is author of Bankruptcy of Our Nation. Now, this is the complete opposite – don’t saw we don’t have a big diversity of opinion here, folks, because you know we do – of our guest, Peter Zeihan, who talked about The Accidental Superpower in episode 442. We’ve got a diversity of opinion here on this show, and we’ll try to keep that coming. You know, you can hear both sides of the story and you can decide who to believe. It’s not who to believe completely, like ‘this guy’s right and that guy’s wrong’; there are bits of truth in each side, right? That’s one of the great things about having a diversity of opinion.
Coco, my dog, you’ve got to stop walking around and making noise when I’m recording a podcast. It’s amazing, folks. She’ll just lay there in her new bed – she got a swanky new bed on www.Amazon.com for $18, love it when you get a bargain, right? It’s a really nice bed for $18, and I think I taught her not to chew this one up, so this one might just last.
Anyway, complete diversity of opinion here, so you’re going to hear some good stuff from Jerry Robinson today. I hope you liked my Aunt Joanie on the last show, and hearing about the $25 million net worth, just from real estate, not other things, that they accumulated just in their old-school investing style way. I hope that interview was interesting to you.
One more thing on alignment, and that’s the focus of the upcoming Meet the Masters Event. It’s empowerment and alignment. I say that you get empowerment by setting up your business deals where they are aligned, where you have win-win-win deals. We’re going to dive deeply into that, but I just want to give you one other example. I’d encourage you to negotiate with your property managers. I was talking with one of our great clients, Fernando, who you heard on the show the other day, and he said that he thought the investment industry has matured so much, and so many people are interested in real estate investing that it seems like there’s just a lot of supply. There’s a lot of business, if you will, in the supply of clients coming at these property managers, and they’re kind of firm. Sometimes they don’t want to negotiate too much, but I say see what you can negotiate. I don’t think you should negotiate the fees in terms of the basic property management fee – that’s pretty reasonable, actually. I think getting anywhere from 6-10% per month, depending on how they set up the deal and what other charges they have, is not bad. I don’t object to that. I don’t think that’s a bad deal, but I have definitely noticed over the past few years that there’s more nickle-and-diming going on with property managers.
One thing that I think is out of alignment – now I think with the last episode, my Aunt Joan’s late fee of just $25 on a $1600 rent, which by the way, is a lousy rent-to-value ratio as you know, and as we discussed on that episode that’s for a $400,000-$450,000 house. Aunt Joanie’s getting like 0.3. Think of how much better we do, and think how much your problems are – if you have any problems, and we all do occasionally with our real estate portfolio. The problem-free concept is a total myth, but if you’ve got a property that’s not rented and you’re listening to this, maybe it’s been on the market for a month or even longer, and you’re getting stressed out about why it hasn’t rented – all you have to do to rent it is just implement a California rent-to-value ratio, or a Miami rent-to-value ratio, or a Boston rent-to-value ratio, or a New York rent-to-value ratio, or a Washington DC rent-to-value ratio, and your house will be rented in (pardon the pun!) a New York minute.
Here’s what I mean by that. Aunt Joan, on the last episode, who’s got a good $25 million in real estate equity sitting around, is getting something like $1600 for a $400,000-$450,000 house. I don’t have my calculator in front of me, but let’s just call that a 0.3% or a 0.4% RV ratio. Now, if your property is worth $100,000 and you’re wanting to rent it for, say, $1000 per month, that’s a 1% RV ratio and that’s a great target. If you’re getting near 1% – a little bit, give or take – or if you’re getting better, hey! more power to you, that’s fantastic. What if you offered that place for rent for 0.3%? Heck, that’s what pretty much everybody in California is getting. Not 1%; just 0.3%, or maybe 0.4%, or maybe 0.5% RV ratio in a very, very rare instance.
If you want to check these out, all you have to do is go to Zillow and look at the Zestimate for price and the Zestimate (as they call it) for rent, and you’ll see that these RV ratios just hold up. It’s amazing. Anywhere in the world, my whole theory of rent to value ratios pretty much applies. I’ve told you before on prior episodes how I can be talking to someone who just rented a million dollar place in Miami, and I said ‘Oh, let me guess, your rent is $3,000 or $3,500/month’. They say ‘Yeah, that’s exactly what we’re paying – how did you know, Jason?’
Well, this is what I do, right? This is what I do, so I know this stuff.
Back to that example of your $100,000 property and your $1000/month rent target. What if you offered it for $300 or $400/month? 0.3% or 0.4%. Yes, people would, metaphorically, line up around the block to rent that property for you. We know, folks, that every problem can be solved by simply lowering the price and by getting closer to what zillions of people who think they’re brilliant investors do in places like South Florida, it could be Fort Lauderdale, it doesn’t have to be Miami, pretty much the whole darn state of California, New York City – any of the North Eastern cities, the higher priced areas of Chicago. In all of these areas, that rent-to-value ratio applies.
The bottom of the market, in terms of just renting a single room, is pretty much $300, maybe $350 per month, almost anywhere. If you’ve got a 3-bedroom, 2-bath house and you offer that for a 0.3% or a 0.4% RV ratio, it would be gone in a New York minute and you’d be doing every bit as well as one of these silly investors that invest in these markets that don’t make any sense. That’s my point.
Okay, on to reviews. Thank you for the nice reviews, folks, I really, really appreciate them. These are from iTunes, I don’t have the Stitcher ones handy. Derek’s from the USA, it doesn’t say exactly where, but he wrote “Five Star Review! This was a great episode about how to get the most out of a real estate investment – useful stuff.” I don’t know which episode he was referring to, but the review was written November 16th, so somewhere around there. Thank you, Derek, I appreciate that.
Mike says, and by the way, the last names are shown on iTunes when they have that as their Screen Name on iTunes, but I’m not reading the last names. Mike, another USA listener gave 5 stars and said “I never review things, but this podcast is simply too wonderful not to leave a review.” Wow, that’s awesome. “The topics range from real estate investing to macro economics to health and science. The guests on the show are very impressive. Jason is an entertaining host and I really appreciate the balance of his shows. It’s not all ‘you can do it!’ hype; he actually explains how and why real estate investing works, provides specific actions to help you get started and offers contrasting views to help you be an educated investor. I strongly recommend this podcast to anyone who wants to get ahead.” Thank you so much, Mike, what a nice review. I really appreciate that.
This one came, and these look like initials – DSM. It’s a 5 star review: “Really great insight into investing. Love what Jason is doing to help people in the investing space and to help them get creative, as well as sharing all the scams and exposing them.” We’ll continue to do that; I think that’s one of my solemn duties. Even when I do get threatening letters from attorneys.
Okay, back to the reviews. Thank you for that review, and we will continue to expose scams when we learn about them. By the way, there are several I have not yet talked about, but that I will get around to when I am up to it. The next review, 5 stars again from Robert in the United Kingdom. Thank you, Robert. It says: “Great info! Not many great podcasts out there with the great stuff, this is it.” Anyway, thank you very much for that.
The next review: “Recommended!” This is from instagramfan008 in, of all places, the Philippines, so we’ve got someone from far away listening. The nice thing about this little program I subscribe to that emails me all the reviews, is that it emails you even your foreign reviews. Did you know, iTunes users, that there is a different iTunes for almost every country? It’s kind of interesting, a lot of people don’t know that, and I’m sure that’s stemmed out of copyright laws and things like that. It’s also from music and language preferences, of course, too. This one says: “Recommended! 5 stars. Listening to Jason as he shares strategies in real estate investing is like getting it straight from the horse’s mouth. Very credible! The show is a good guide to survive in the world of investing”. Thank you for that.
The last one on this list is “Always learning something” by podcastinsider, so this must be a real podcast fan. “Great show, super informative, always learning something new. 5 stars.” Thank you so much for that, and indulge me, listeners, before we get to our guest. This guest may depress you a little bit. Let me just read a couple more!
This one is a 4 star review, so oh well, I didn’t quite get 5 stars on that one. Let’s see what he says. This is by dlewismartin, it’s all clumped together as one word, but that’s what I would make that name out to be. “Taste wise, I don’t typically listen to shows about business and real estate, but not because they are bad by nature, just because it’s not content that interests me. BUT Jason had a guest on show number 442” – who was that guest, by the way, I can’t remember; I’ve got to check that one out – “it was a great conversation. It wasn’t stuffy or boring. Both men had opinions and points of view that were interesting. It was a solid episode.” 442, what was that? Oh! That was Peter Zeihan, The Accidental Superpower, and the opposite of today’s guest.
Okay, the next review – there’s only a couple more here – is “Guns vs. Butter” by erickruger from the USA. 5 stars: “Love it. Listen to 422” – I don’t know what 422 was, I don’t have that one handy – “Money education is so needed, thank you for this.” My pleasure. Thank you for the review.
The next review says: “Great”, and this is by Brian, another USA listener: “I enjoyed the property management episode. The show is well-structured, the host is good and I look forward to more.” Well-structured; I don’t think I deserve that compliment, Brian, but thank you anyway! I’m going off on tangents left, right and everywhere you look, but I’m glad you think it’s well-structured. I don’t believe I deserve it, but I’ll take it, so thank you.
The last review, and then we will get to our guest, I promise. “Nobody does it better than Jason! 5 stars.” This is by kevdav, and some numbers, so that’s probably Kevin, I assume. It says “Jason is great at what he does. I love how he’s bringing in perspectives from people that are successful in various industries.” Keep them coming, folks, thank you for the great reviews. Please go write one if you haven’t done so already; I finally started asking for them and I love what we’re getting back, so thank you very much. I really appreciate that.
Be sure to register for our upcoming Meet the Masters Event. It is coming together and it’s going to be awesome. It’s about investor empowerment and alignment, and how you can get your deals aligned. Here’s the thing I didn’t say when I went off on one of my tangents a moment ago. Late fees. Negotiate the late fees with your property managers. Some managers like to keep the late fees. The property manager sometimes has to do some extra work when the tenant is late, admittedly, but when you have a rental that’s, say a lower priced property, say it only rents for $750/month and the manager is charging a $75 late fee, and they keep that late fee and don’t share it with you as the owner. I think you’ve got to throw that deal out the window. I think you’ve got to negotiate with your manager and say ‘Look, you can charge a late fee’ – even if it’s $75, which I think it pretty high at 10%. If it’s a higher priced property, $75 is fine, but if the rent’s $750 and they’re charging $75, I think that’s pretty high as a late fee. Late fees are typically around 6% of the rental amount, somewhere in that range. On that one, tell the manager they’ve got to split it with you. They need to give you half of the late fee so there’s an incentive, number 1: Not to be dinging the tenant too much. Remember, it’s got to be a win-win-win – the third win is the tenant. You’re the first one as the investor, then the manager, then the tenant. The tenant’s got to win too. They’re likely to stay longer if they’re happier and they’re not getting beat up too much on late fees.
Remember on the last episode I mentioned our manager, who’s selling funds and stuff in the Phoenix market. He’s the manager of an apartment complex than my partner and I own. He called me and he was really upset that he found out that they were charging $150 as a lock-out fee, to let the tenant back into their property when they lost their keys. He said ‘How’s the tenant going to feel? How likely is that tenant to renew their lease and be a good, happy tenant at your property if they’re getting totally beat up on fees like this?’ That’s just not cool. It’s got to be win-win-win, alignment, empowerment. That’s what we’re talking about at Meet the Masters. It’s selling out pretty quickly, we’re going to have another price increase here pretty quick because we have sold a lot of tickets to that event already. Get yours at www.JasonHartman.com, in the Events section and join as a Member first to get a big discount on that.
By the way, our Cyber Monday sale runs for a couple more days here. Take advantage of, I think, 40% off all our digital products. It’s the biggest sale of the year, folks. A lot of you have taken advantage of it so be sure some more of you do that.
Anyway, let’s get to our guest, and that is Jerry Robinson, talking about Bankruptcy of Our Nation, here we go.
It’s my pleasure to welcome Jerry Robinson; he is Editor-in-Chief of Follow the Money quarterly financial newsletter, host of Follow the Money weekly and author of Bankruptcy of Our Nation: Twelve Key Strategies for Protecting Your Finances in These Uncertain Times. Jerry, welcome, how are you?
Jerry Robinson:
I’m great, thank you so much for having me on. It’s a pleasure to be here.
Jason:
It’s good to have you. Your book is fascinating, and I want to just dive right in and talk about that. Let’s maybe start off with talking a little bit about the overall situation, and then dive into some of the discussion on the petrodollar and what that means to people.
Jerry:
Sure, well the book, Bankruptcy of Our Nation, I don’t think is really a prophetic book. Whenever I wrote the book, back in 2007, I was under the impression that we were going to be in for a major, major economic collapse. I was desperately trying to get the book published so we could get the word out, and no-one would touch it. In fact, no-one would even consider it until September 2008 when I was speaking at a conference out in Denver. I was talking about this very topic – in fact, the name of my speech was ‘Surviving Financial Chaos’. The market totally imploded in September 2008, as you well remember, and when I got back from the speech that I was giving, I had 5 missed calls from my literary agent and he said ‘We have 5 offers for the book’. It was such an exciting moment for me so we were able to get the book published. The publisher wanted to get it out very quickly so it came out just at the end of 2008 and towards early 2009.
The book really breaks apart what we thought was going to happen and of course, what ended up happening with the whole economic crisis. It kind of explains in layman’s terms what really happened, and I think it’s unfortunate that so many people today often try to formulate answers or solutions without firmly having a grasp of what the real underlying problems are. In the book, we lay out what these underlying problems are: ie, fiat money, a debt-based monetary system, fractional reserve banking. Many of these things that are very faulty, that have terrible foundations, that cannot last, that are unsound and that over time, are simply going to break down. That was the whole message of the book. The book goes on and explains how people can take actions to protect themselves, even some specific things that people can do. The book is a mixture of both what went wrong and what individuals can specifically do to insulate themselves from what we believe is still going to be a further downfall in the years ahead.
Jason:
What does that downfall look like when you talk about Bankruptcy of Our Nation? Obviously we create fiat money in mass quantities out of thin air, and we can get away with this for a few reasons. Number 1: Every nation can get away with it for a certain amount of time, and then it ultimately becomes unsustainable and the country collapses. The difference with the US is we have the largest military in human history, we have the reserve currency – at least for the moment, and there are several other factors that I think do make it pretty unique. What does a bankruptcy look like? Does it look like a collapse of the economy, or does it just look like we’re inflating away this irresponsible spending that the government has been engaging in for so many decades, and especially over the last 7 years? Most people are just impoverished by the inflation, but some are enriched by it – they know how to play the game and invest for it. What does the bankruptcy look like? What do you mean when you say ‘bankruptcy’?
Jerry:
Jason, what we usually refer people to is to look back to 1914, as opposed to where we are now in 2014. One hundred years ago, you had a very bloated British empire that was on its way down and everybody knew it, and then you had this ascending United States of America that was very disarticulated. It developed the Fed in 1913 and it suffered from the panic of 1907 before that. As we got into World War One, Europe tore each other apart, and this really benefited the United States. The United States then emerges and enters this Roaring Twenties era, and then has this Great Depression. Then World War Two, of course, is where the United States really takes off. It’s really since the 1940s that America has really had the stranglehold, so to speak, on the global economy, and it has had that world reserve currency status. It’s similar to what’s happening now. If we fast-forward from the 1914 picture to 2014, we see something very similar. The American empire itself is bloated, it’s over-extended and it’s all over the place. Our military is woefully under-prepared for some of the challenges that it faces and it simply cannot afford to take care of all of the things that it wants to take care of. It’s over-promised and now it’s going to under-deliver, and that’s exactly where the British Empire was 100 years ago. And China is the new United States, so to speak, in this picture, where here we have China rising and you have all these complaints: ‘China certainly can’t get much bigger’, or ‘Certainly, it’s going to implode’, or ‘Certainly, it’s going to have a problem’. That’s what they said about the United States back in 1914, and no doubt, it was a very disarticulated time for the United States. The US dollar was still being formed and it was nothing like it is now; it was still blocked out of many international financial markets so it took a while for the US to reach its state of ascendancy and finally reach its peak. This really came back in the Seventies and Eighties.
Since that time, we’ve been on the downward trend, even though it may not feel like it, and we have countries like China that are now rising to take our place. It is simply the mechanism of history, Jason, that empires rise and empires fall. I think whenever you’re inside of a declining empire, you tend to either A) ignore it or maybe you can’t see it because of the fog of war, or B) you think to yourself ‘This is going to be the worst thing that ever happened in the history of the world, because it’s a bit arrogant’. We all tend to think that our country and our situation is the most important in the whole world. Well, we expect the US to continue declining, not at a precipitous rate, but at a aggravatingly sharp rate.
I’ll give you an example.
Jason:
Is that worse than precipitous? I don’t know.
Jerry:
It is, but I’ll give you a perfect example. If you have a choice – and this is terribly morbid, but let’s think in the terms of empire – if you have the opportunity to kill the empire by throwing it off of a cliff or by rolling it down a steep grade and letting it hit every single rock on the way down, and then it dies, just throw me off the cliff! I think that’s what most people would say. Just throw me off the cliff; don’t roll me down the hill and make me hit every rock along the way. That’s exactly what the US is doing. It’s rolling down that steep grade. This is a slow, steady decline and it’s going to be not just economically challenging and economically damaging, but we’re beginning to see that it’s going to be psychologically damaging too.
Americans can’t quite come to terms with the fact that other nations may be rising or that other currencies may challenge the dollar. They just can’t seem to grasp that.
Jason:
I definitely get the idea of context. Fish live in water and I assume they probably don’t notice the water. We live in air, and thankfully, unless we live in Cairo or Mexico City, we don’t notice the air! So you’re right about that, and I definitely see that. There’s this kind of arrogance and there’s the fog of war and all that stuff, but it’s so interesting because this is such a contrast from one interview I did yesterday with a guy named Peter Zeihan, who used to work for Stratfor as a VP. He wrote a book called The Accidental Superpower: The Next Generation of American Pre-Eminence, which talks about how this is a relative issue. America’s a mess, I agree, and I agree that it’s in decline, but look at the rest of the world. My God! We may be mismanaged and doing all sorts of things wrong, but everybody else has got fiat money too, and they don’t have the reserve currency, they don’t have the big military, they don’t have the big brand name and they don’t have our geography. I think the geography cannot be underestimated. Go ahead.
Jerry:
I think it’s a good point, but again, think about America’s military. The United States, right now, cannot afford America’s military.
Jason:
We’ve got to get out of everyone else’s business. This is just absurd, acting like the world’s policeman, and it’s usually not for humanitarian issues as we would like people to believe. That’s neither here nor there; Ron Paul is right. We’ve got to contract these military bases all over the world. It’s absurd and it’s every sign of empire, just like you said. I agree.
Jerry:
What makes it even worse, Jason, is the fact that it is too big. Yes, we are in too many places. And yes, we have too many bases. But the sad part of it is that China and other countries like it are the ones that finance it. Many people take great solace in knowing that yes, we are pretty bad, relatively speaking, but when you look at the whole world in focus, I guess things aren’t as bad as they could be. The truth of the matter is exactly the opposite.
It’s worse than we can imagine because what we have built, we can’t afford. What other countries have built, they can afford. What we have built, we need them to pay for, and when they get tired of paying for it, then what good is that military?
Jason:
So tell me about that. What happens when they get tired of paying for it? Certainly, many people, including yours truly, have said ‘What happens when China and Japan stop buying our debt?’ Then we’ve got to raise interest rates to attract investors. It’s such a freaking ponzi scheme, it’s disgusting, but our own Federal Reserve just buys our debt instead. What a scam! The whole thing’s a sham, obviously. So what? How does it look when that happens?
Jerry:
This reminds me of the 2008 and 2012 Presidential Elections. We just had Ron Paul on our weekly program last week.
Jason:
I’m a huge fan of Ron Paul.
Jerry:
Yeah, he was on and we were talking, and one of the things I brought up to him was so bizarre – I said ‘All the Conservatives and Republicans have this real fun saying. They say ‘Well, I love Ron Paul’s monetary economic side; I hate his foreign policy.’
Jason:
He’s right about his foreign policy. If he would just pander a little bit, he could have won. If he would just say ‘We’ll hang out in Israel, we’ll do everything we’re doing for Israel and we won’t let Iran get a nuke’. If he just would have said that, he probably would be President and the whole country would be better off.
Jerry:
Well, take that logic of someone who says ‘I really like Ron Paul’s In the Fed message, I like his sound money message, I just don’t like his foreign policy message’. When you take that and you add 1+1+1, you get a very strange answer – how in the world can you finance our foreign policy without a Federal Reserve? In other words, they want to get rid of the Fed, they want sound money and they want to keep dropping bombs on everybody. You see, you have to have a Fed..
Jason:
You can’t do both.
Jerry:
You have to have a Fed in order to fund those wars.
Jason:
Of course, and that’s why the Central Bankers love war and we’re never going to have peace as long as the Central Bankers run the world.
Jerry:
You’ve got it.
Jason:
It’s more than the military industrial complex; that’s just the first tier that everybody sees as somewhat obvious. The real complex is the Government Central Banking complex; that’s the real thing that creates the war. They have to have the war machine – they finance both sides! It’s absurd.
Jerry:
People just don’t think about it in terms of basic incentive. When I’m walking around in my own city, there’s certain incentives that I have and there’s certain incentives that I don’t have. Everybody, in their own life, can think ‘Why do I get up and go to work?’ ‘I get up and go to work because I need money’. Those are real basic incentives that we all understand, but many times we don’t apply that same logic to things like Central Banks.
What does the Central Bank want? It wants to loan money to a Government.
How do you loan money to Governments? You create a demand for loans from the Government.
What’s the perfect way to create demand for a loan from the Government? A war.
When you really back up into it, what you just said is very correct, but it’s because of the incentives. Many people don’t think that far; they realize that they’re driven by incentives, but they forget that these guys who are Republicans, Democrats, Central Bankers, whatever the case might be, have incentives too. Usually, they’re contrary to what is best for this nation going forward.
Jason:
Yeah, no question about it. So what does the bankruptcy look like? Is it just inflation? Well, not ‘just’, that could be really bad, obviously. When you say ‘bankruptcy of a country’, how does it look?
Jerry:
Look, America is unique in the fact that it does have more wealth on paper and even in physical form, than many other nations. We are very, very, very rich, relatively speaking. Again, that means that the bankruptcy is going to first take the form of a psychological pain. It’s a psychological denial; it’s ‘No, China is not getting bigger. No, China’s going to fail. No, the Euro’s going to crash. No, the Middle East stocks can’t possibly rise. No, India’s not going to rise’. It’s very America-centric, so there’s a psychological denial which will cause many people not to diversify their investments and to not take advantage of foreign growth. Therefore, they’ll stay right here in the United States, and as that ship sinks, we’re going to continue to see that psychological pain. The actual physical and financial pain that’s going to be inflicted is going to be, as you mentioned, inflation, in the fact that we have printed so many dollars and there’s so much demand for the dollar – therefore, the Central Bank has a permission slip to print money whenever we have a problem.
Think about the Alan Greenspan doctrine. The Greenspan doctrine was this: 1987, Alan Greenspan gets in to the Federal Reserve as the Chairman, and we have a big stock market crash. He cuts rates as the solution. In 1994, the Tequila Hangover, he cuts rates. 1997 and 1998, the Asian Financial Crisis, long term capital management debacle and all that, the Fed cuts rates. 2001, they cut rates. 2003, they cut rates. That’s all they do, and they keep printing more money.
Over time, once that becomes the solution to everything, then you become addicted to that solution. Here’s the problem: if the dollar itself is not in demand everywhere like it is now, you lose that permission slip to print money. Then you can’t solve the problems of the nation by simply hitting the Print button because there’s nobody around the world who’s willing to hold those. That’s how the whole thing works. If we can print the money and then get it out of the country, then we don’t have that inflation. What happens in a case like this is where you don’t have that global demand for the dollar because maybe people want to hold Yuan, or maybe people want to hold Euros, or maybe they want to hold gold or something like that. Then they don’t need as many dollars and as that demand for dollars goes down, we also lose the permission slip to create an excess of supply.
Here’s the big, big kicker. If you live in an economy, Jason – let’s say that we live in this fake economy and it has $1 million total supply. That’s it, that’s the total money supply. Well, you have no houses that cost $2 million, that’s impossible. Everything has to cost less than $1 million. In fact, it has to cost dramatically less because you have to spread everything out across that amount. That’s in essence what we have done. We have driven up the amount of money, and then we’re surprised when our 401(k)s go up, or when our house values go up, or when we get a raise. In fact, where we are today, Jason, and this is that psychological pain I’m trying to explain – we live in a time now where the present must be the minimum. People are dissatisfied if the market does not go up. Something is wrong if they don’t get a raise. Something is wrong if their house value doesn’t go up. Something is wrong if their IRA doesn’t go up. They’re addicted to the present being the minimum; everything has to be the minimum and everything has to go up from here.
The problem with that is it’s completely unsustainable. A) That’s not how things have worked throughout history because of the Gold Standard, and B) that’s an unsustainable model. Things cannot continue to go up in value, so here’s what we say: as we see a decline in the demand for the dollar around the world and for US debt, that’s going to translate into an overall deflation in the US prices. It’ll begin with an inflation. You’ll have all of these dollars come back from around the world – perhaps it happens instantly, but I think it’ll happen slowly. You have all these dollars flowing back and then we have to suck them out. How do we do that? We suck money out of the system by raising interest rates. If you and I are driving down the road and we see a bank and they’re saying ‘Hey, we’ll give you 8% a year for a CD’ – you know we’re hitting the brakes and taking all of our money out of the mattress and throwing it in the bank. That’s how the banking community and the banking industry sucks money out of economy to prevent high inflation. What they’ll do is suck the money in through high interest rates and that seems to fix the problem. We have so much excess money that we’re going to have to keep doing that over and over and over again to where it’s going to cause major problems. Think about the trillion dollars we have in student loan debt, think about all the credit card debt, think about all the adjustable rate mortgages out there. It’s just a mess.
If you get higher interest rates, that’s going to be very devastating to people. This ‘present is the minimum’ kind of psychology where everything should go up is going to be destroyed. In fact, it’s going to be the opposite. Things will be declining and deflating back to a place of normalcy and back to a place of sanity. That, I think, is going to be the hardest thing for people to understand: things don’t go up anymore, they just seem to be going down every year. That’s because we have too much money in the system; it’s going to have to be reduced over time because the global demand will not always exist for it, and that means the housing prices, stock prices, the amount you get paid when you go to work – all of those things are all factors based upon the amount of money in the system. If the money supply shrinks, so do all those values.
Jason:
Okay, so if the money supply shrinks, then we have deflation. If it expands, we have inflation. That’s the general rule as Milton Friedman would have said – inflation is and is always a monetary phenomenon, or something like that, as his famous quote goes.
I think the opposite will happen. I think that the government will print their way out of the irresponsible problem they’ve created – they’ll just create more money out of thin air. If other governments won’t buy our treasuries, of course we’ll attempt to throw our weight around and bully them into it, whether it’s by trade agreements or visa requirements or maybe invading the country with military. Whatever, I’m not saying it’s right, I’m just saying this is what goes on.
Jerry:
I think we’re on the same page there, we’re probably coming at it from different angles. What I’m saying is that we are going to see a period of great inflation, it’s going to be hyper-inflation of sorts. Hyper-inflation never lasts forever; it always ends in a period of great deflation and revaluation. It’ll begin as a period of inflation, but the rates will have to go up in correspondence with that, and we’re not going to be able to get the rates high enough to be able to manage the excessive amount of money. Even if they print money, if it doesn’t leave the country, they’re just going to be creating more inflation so they’ll have to raise interest rates. It’s a vicious cycle.
It’ll begin as inflation, there’ll be a big response to the inflation, and then as they raise interest rates and as the economy grinds to a halt, then we move into a period of deflation. Again, they don’t have a permission slip to print money anymore. If the Chinese will hold the dollars and keep them out of our banking system, we don’t have inflation. But if the Fed prints them and they don’t leave the country, that’s inflation and you can’t get rid of that. They can print all they want to, but if it doesn’t leave the country, you have inflation. Therefore, they’ll have to raise rates and that will stop working. They can keep printing, like you’re saying, but there’ll come a time when if the money is not demanded outside of the country, they’ll be smart enough not to hit it because they’ll just be creating a terrible amount of inflation that will ultimately lead to a period of deflation as we move back to a level of sanity.
Jason:
So, I think one of the challenges when we’re looking at this type of economy. Obviously, the economy in the country is very complex, but then you take it to a global scale and it gets incredibly complex. What economists are trying to do is anticipate how people, countries, companies will react to various stimuli. In the past 10 years, almost every prediction I’ve made about the economy and the real estate market has come true, except one glaring mistake I’ve made. The glaring mistake is interest rates. If you asked me in 2005, ‘Would we have significantly higher rates by 2008?’ I would have said ‘Yes!’ and I did, publicly. I was completely wrong about this, and the reason I was wrong is because it doesn’t make sense. This isn’t just about logic and math. There’s so much more going on here that is perverting the incentives. One of the things that’s doing that is this giant government we have, with its military and with the fact that it can kind of defy gravity and kick the can down the road. It’s been doing it for a long, long time and it’s really doing it now.
Who’s to say, Jerry, how much deficit and how much debt and how much unfunded entitlements for the future we can withstand? Is that number $17 trillion? Is that number $60 trillion? Or $220 trillion? I had Lawrence Kotlikoff on the show, and he said ‘Unfunded mandates are $220 trillion’. The whole GDP of the planet is only about $60 trillion a year. That’s insane, right? We would all agree with that, but it doesn’t exist in a rational world. I agree, if you do the math, absolutely. We should be sucking wind by now and having 25% interest rates, but it’s not just math. Thoughts?
Jerry:
Well, I would say that’s certainly true. The interest rates being so low now, and you even used this word, it’s distorting.
Jason:
It’s artificial.
Jerry:
It’s artificial and it’s distorting incentives, it’s distorting the overall market, it’s hurting savers, it’s punishing those wanting to save and it’s encouraging speculation. It’s doing everything that we did in 2007. We haven’t learned a single lesson and we’re just repeating it over and over and over again. Countries get a few chances to do this, Jason, they don’t get a pass forever. You already have countries like China, Russia, India – the BRICs nations are coming together saying ‘Look, we’ve got to come up with a different solution’.
Jason:
You can’t blame them, we’re exporting our inflation to them. They’re the ones hit with it, not us. We are a little bit, but it hurts them more. It’s really unfair.
Jerry:
It really is, and it’s becoming more exposed as to America’s true intentions with all of this. Back in September 2000, Saddam Hussein emerged from a meeting with all of his cronies and they had decided to take a gamble and move from accepting dollars for all of their crude oil to accepting Euros. About 4 years later, he was hanging from a tree.
Then you had Iran do something similar, North Korea did something similar – they said ‘We’re not going to pay for anything, we’re only going to use Euros, we’re only going to buy from people who sell in Euros’, and then Venezuela did the same thing. Then we had Bush talking about this ‘axis of evil’ and these evil, evil countries.
Jason:
The people that don’t participate in the Central Banking cartel are the evil ones, right? Conveniently.
Jerry:
These countries are extremely evil, they have terrible human rights records and therefore we need to isolate them and call them the axis of evil. By the way, ignoring Saudi Arabia who still publicly beheads people and still has terrible human rights. If you’re going to talk about human rights, Saudi Arabia tops the list. Or China. But there was no mention of that because China and Saudi Arabia understand how the drill works – you use the US dollar and you don’t fight back. China has been fighting that, Russia has been fighting that and you’re beginning to see Russia now being labeled as part of this axis of evil. ‘It’s an evil empire we’re seeing’. It all has to do with protecting our petrodollar system that we built back in the Seventies after the Bretton Woods system broke down. The petrodollar system now is breaking down before our eyes, many countries are moving away from using oil for dollars and dollars for oil. Instead, they’re looking for other things. China and Russia are using their own currencies when trading oil, and this is the kind of thing I’m talking about, Jason.
If everybody around the world must have a dollar in order to buy oil, then it creates that artificial demand for the dollar, and that’s exactly what we’ve done. We’ve created an artificial demand for the dollar that didn’t exist prior to the Seventies. Everybody has to have it. They don’t want to have it, they have to have it. Well what happens when that goes away?
Suddenly you’ve got to figure out what to do with all these trillions and trillions and trillions of dollars. If those things aren’t going to be held by all these countries, they’re going to have to come back here. Then we’re going to have to decide on either A) everything that we have is now going to have to be worth more, or B) we’re going to have to suck this money out of the system and raise rates, and that’s going to lead to a period of deflation. This is what I’m saying.
Jason:
Okay, so let me just ask you about that before you go on. What you’re saying is that basically if those dollars have to come back, that’s because the dollar is no longer the reserve currency?
Jerry:
Yeah. There’s no further demand and no need. ‘I don’t need to hold the dollar, I can hold my own currency because now I have other countries who are willing to take my currency for things instead of making me convert to a dollar.’ Because all of these nations around the world with a gun to the head artificially have to prop up this artificial demand for the dollar to buy things, it’s created this permission slip for the Fed – any time we’ve got a problem, we just print money. Well, that’s fine, but what happens whenever these countries begin to trade in their own currencies is that they don’t have to keep the dollar around. They send the dollar back, and when the Fed hits the print button, it doesn’t go anywhere. All the money stays in the country, and that’s when the game is over.
Jason:
Okay, so what would lead up to that? What would have to happen? What you’re describing is the dollar not being the reserve currency anymore, right?
Jerry:
Exactly. A number of things could happen. 1. Saudi Arabia could suddenly decide that it no longer wants to use the dollar, it’s tired of the US and it’s going to have a new deal with China or with Russia. You could see something like that. I think Saudi Arabia, in my ways, is the linchpin that props up the dollar more than people realize.
Jason:
We sent our economic hit-man over there years ago to do the job, so when Saudi Arabia was a wasteland, we turned it into a semi-modern country. I kind of don’t want to say it’s modern when they’re cutting heads and hands off people, it’s despicable. Go ahead.
Jerry:
Well, of course. That’ll be a very big shock, I think, for many Americans, when they see bombs falling on Saudi Arabia because they’ve always thought that Saudi Arabia was somehow different from all of the other Islamic terrorist regimes that are over there in the Middle East. They’ve always thought Saudi Arabia was our buddy. They didn’t realize that it was just a back-room financial deal and that as soon as it goes wrong, the bombs are going to fall.
The United States hates Saudi Arabia and Saudi Arabia hates the United States, that’s no secret. What it a secret, though, is why we like each other. We like each other because they take dollars for oil and they don’t complain about it. They turn around and take those dollars and they invest them in US bonds – it’s called petrodollar recycling and it’s been going on for years. Saudi Arabia gets the whole thing and they get all the benefits. You’ve got groups like ISIS now, running around saying that Saudi’s the Great Satan and they want to take it down. Over time, when this royal Saudi family, which has really buddied up with America – when they lose power or when they change their minds, the whole balance of power in the Middle East changes and the demand for the dollar certainly goes with it.
The US is playing a very dangerous game, trying to manage all of its relationships around the world, trying to keep peace with the right people, and trying to continue to fight the other people. In the long run, it’s all going to break down.
Jason:
OKay, so let me just ask you one thing about that. One thing you didn’t address in that equation, which I agree with so far, is the fact that Saudi Arabia and the rest of the Middle East is about to lose its biggest oil customer. We are probably going to become an actual oil exporter pretty soon. The US is so much richer in terms of oil than we ever realized, and then Canada of course is too. The US is going to be energy-independent. Granted, it might be with fossil fuels to the chagrin of the Obama regime, but we’re rich in natural resources, as you mentioned earlier, and we didn’t even know it until fracking came along and oil sands technologies. Who cares about Saudi Arabia? They’re just going to have the rest of the world as a bunch of smaller customers after we’re gone.
Jerry:
Well, maybe. The way to look at it perhaps differently, is to say that somebody like Saudi Arabia created an artificial demand for the US dollar because they sell their oil in dollars. Because they do it, other OPEC nations do it. It’s kind of a domino theory. If the US begins exporting oil and doesn’t need Saudi Arabia anymore, then why would Saudi Arabia choose to sell all of its oil in dollars? Why not sell it in Yuan? Why not sell it in a different currency where somebody’s actually going to give them a benefit?
That’s the thing. We can sell all of our oil in our own currency, but if we lose all of our buddies around the world who are agreeing to doing the same thing, we’re still in the same boat. In other words, we have to have a global demand for our debt and we have to maintain a global demand for our currency. If we don’t, then we implode, and I think that’s the risk that’s facing Washington right now. They have to maintain this demand globally for both.
This is the double-edged sword of the oil exports that we have. Yes, we certainly have an oil renaissance happening here, albeit it’s shale, rather than pure, conventional oil. Nevertheless, we are still exporting that, or we’re going to be able to export it and we’re going to do very well with that. Again, though, that just basically shoots all of our friends in the face who have been agreeing to take our currency for everything. If we’re now their challenger, they lose their incentive to continue to prop up our currency. It’s one of those things where it’s a real difficult thing for the United States, and it’s really going to be interesting over the next decade to see how Washington handles this going forward, especially all the oil you just brought up. That’s a whole other can of worms.
Jason:
Yeah, it certainly is. It’s going to be interesting, that’s for sure. The other wild card, Jerry, that I think it’s worth discussing just for a moment is that of course these countries are probably pretty disgusted with the US spending and the exporting of inflation. China sells stuff to us, we buy it and then we depreciate the value of the currency, so we force them to sell things on sale to us for less than they thought they were getting. That is definitely not a cool deal for them. It’s not like the US is going to sit idly by and let the whole world just decide they’re going to trade outside of the dollar and not go with the Bretton Woods plan and the petrodollar plan. We’re going to do something about it, right? We’re going to throw our weight around and say ‘Hey, look, if you’re not going to trade in the dollar, then we’re going to pressure you somehow. Maybe we’ll blow up your satellite.’
Jerry:
Oh yeah.
Jason:
This is not a friendly game. ‘Maybe we just won’t buy as much from you, or maybe we’ll impose tariffs or visa requirements.’ You can hurt other countries in a zillion different ways and pressure them in so many ways.
Jerry:
That’s right. Empires don’t have friends, they have subjects.
Jason:
Good point.
Jerry:
America’s an empire, no doubt. Maybe it’s a reluctant empire, but it’s an empire. Yeah, countries around the world – when they decide to make a change and the United States tries to woo them back, they’re going to have to do better than they have already. For example, the United States has been over there messing around with its Asian pivot over in South East Asia, and it’s been brokering deals, especially the one that’s made all the headlines as the TTP. There’s been a lot of concern about the fact that China has been left out of that trade agreement.
The United States has really just kind of shot itself in the foot; it’s really not doing a great job of reaching out and embracing the emerging countries. It’s been very selective with the ones that it’s befriending, and China and Russia have been picking up the slack and they have been forming relationships with many of these other emerging nations. You’re really kind of developing this bi-polar world – one that supports NATO and the US and the West, and another that supports this BRICs kind of development. I think that’s where you end up. You end up in a place where somebody’s going to have to choose sides, but the US has kind of lost its ability to come across as an honest broker. I think its hand has been shown; everybody knows now. We’re spying on all of our creditors!
Jason:
That’s just ridiculous.
Jerry:
You go down the list and you think ‘Gosh, when does the blow-back really hit the United States?’ I don’t even think we’ve seen the blow-back from the Snowden affair. I think Americans themselves are still trying to figure out what that even means. I don’t think many people even know how to process that, let alone the companies around the world, the foreign corporations who have been targets of that. There will be blow-back.
Jason:
When you say ‘that’, do you mean the NSA spying that Snowden revealed to the world?
Jerry:
Yeah, I should clarify. I’m referring to the NSA spying that’s been going on for so long. Imagine, Jason, if we were to find out that China was actually aggressively looking at us through our television screens as we sat and watched TV on the couch. Wouldn’t we be a little upset about that? Wouldn’t we have a little more distrust about China? Wouldn’t we be a little bit more concerned? It’s almost as if America just says ‘Well, deal with it, it’s tough, we’ve just got to protect our own,’ and they don’t realize that these nations have feelings and they also have their own share of wisdom and they’re going to say ‘This may not be the best thing to be hanging out with America the way that they’re proceeding’, and I think over time, you’re going to have a severe blow-back from that.
We’re already beginning to see that in the technology industry; many of our big tech companies are running into problems because of the NSA. I think it’s just this long, slow grind, Jason, that we continue to see this downward spiral. I don’t think it’s a off-the-cliff or we’ll run into a brick wall and it’s all over. I don’t subscribe to that theory; I think it’s a slow grind. I think it’s a terrible slow process that is humiliating both psychologically and financially. Our standing in the world is already being questioned now. There are so many things that we could talk about, but yes, I think that that’s where we’re heading.
Jason:
Okay, good. Good points. So what should people do? We’ve talked extensively about the problem, and in hundreds of other episodes I’ve done the same. What’s the best game plan for one to protect oneself against the problems we face?
Jerry:
I’ll tell you – I have an interesting story to share. I was living in Houston, Texas, of all places. It’s a very big city. It’s not where I’m originally from, but I went down there to start a business. I was down there for some time and a few years ago, something in me just really convicted me. I’m sure it was the Lord, and I just sensed that I had to get out of Houston and get out into the middle of nowhere. My wife and I began doing research and we said ‘Where will we move to?’ We started looking and we decided to move to North-West Arkansas, based upon all these different factors. We did a little spreadsheet and got kind of nerdy about it, but we really wanted to figure out where the best place to go for us was and for our situation.
We moved up here, we got a mini ranch, we built a garden, we are slowly getting off of the grid. We have wood-burning fireplaces, wood-burning stoves and we’re slowly getting off the grid with water by using a well. We’re doing everything that we possibly can because, Jason, I think not just the financial things that we’ve been talking about are a threat to the American people, but at the same time, some of the punitive damage that’s going to come to America is not just going to come through the barrel of a gun, it’s going to come through a cyber attack that shuts down your whole electric grid. Or it’s going to come through a cyber attack that takes down your bank, it’s going to come through a cyber attack that takes down your local utilities. Currently, the Wall Street Journal has been reporting ad nauseam, constantly about how many of these public utilities here in America are dealing with unbelievable amounts of cyber attacks from China, Iran, Russia and other places like that.
Eventually, one of those is going to succeed. I think it’s imperative for people to be ready. If they are currently living in a city, I think they can certainly take precautions. There’s some good books out there on urban survival, I’m sure you have some good materials as well.
Jason:
Hey, I do a whole show on it – the Holistic Survival Show.
Jerry:
Yeah, there you go.
Jason:
Absolutely. There’s a lot of great resources, and one of the things I want to stress, Jerry, is that this is not nutty. It’s nutty if you spend your whole life on it and you make it everything you do, but basically, for about $200-$300 per person in your household, you can gain a huge edge in prudent, rational preparedness. This is not difficult to do, okay. Even if you live in a city. It’s like the old story of two hikers – they’re hiking in the woods and they see a bear. One of them starts running away from the bear and one of them stops to tighten his shoelaces. The other says ‘Hey, what are you doing, man? You’ve got to keep running. Forget about tightening your shoelaces, you can’t outrun a bear.’
The other one says ‘I don’t need to outrun the bear, I just need to outrun you!’
Jerry:
[Laughs]. Right.
Jason:
And that’s really what it is. As vicious as that sounds, you just need to outlive or out-survive the people around you. When you do, there will be leftover resources available, to some extent at least. I think 3 days is the first magic number, and then 3 weeks is the next one. It’s 3 days water – you’re going to die if you don’t drink for 3 days (or you’re going to get close), and food is 3 weeks. Have a ham radio for communications off the grid. It’s just some really simple stuff; this is not difficult to do.
Jerry:
No, no, it’s really not. As you pointed out, it’s not nutty. I think what’s nutty is buying into the whole idea of the American dream and thinking that somehow, we’re not facing real serious issues and problems. I think that being awake and aware to that is vital. Some of the things we do, Jason, is we teach something called the Five Levels of Financial Freedom. It’s completely free, people can log onto our website and see it there.
Jason:
Give out that website.
Jerry:
It’s https://followthemoney.com/fivelevels/
Jason:
What are those five levels?
Jerry:
Those five levels are five kind of large steps with some micro-things inside of them. They’re kind of the big planks. These are five steps that my wife and I have taken to financial freedom. We call them the Five Levels to Financial Freedom. We went literally from a one-bedroom apartment to where we are now, and we’re much better off now than what we were. We used these five levels to get there, and they involve A) Diversifying your savings, B) Diversifying your investments, C) Diversifying your income sources. Along with that, basic preparatory type actions. We talk about the need for having a go-back, we talk about the need for having food and water storage, we talk about the need for people to actually invest in a portion of their savings – not actually invest, but take a portion of their savings and diversify. I’ll give you one example.
We have something we call DSL. It’s our Diversified Six-Month Liquid Savings Reserve. Most people tell you ‘Hey, you should have 3 months of liquid savings’, or maybe even six months of liquid savings. We agree, but we did a back-test in the study that showed that if you will take that savings and not just throw it in US dollars, but if you’ll diversify it, you can really get a lot more bang for your buck. We did a study that went back 25 years, that showed that if you took your six months of liquidity and threw it in 3 month bills and just kept reinvesting them over and over again, or if you had taken that same six-months liquidity and put one third of it in the bills and taken the other third and put it into stable foreign currencies, and taken the last third and put it into gold and silver, for a period of 25 years, the return is just outrageous. We even took out some of the extra gains in gold and silver to make sure it wasn’t being jacked up by that price gain in metals.
That’s one thing. We diversify our savings. We also diversify our investments with something we call ‘PACE’ – P: Precious Metals, A: Agriculture, C: Commodities, E: Energy. We talk about those areas as ways to diversify our investments against some sort of inflation, and then we also teach the absolute importance – and I think this is one of the most important things for people today – of diversifying their income streams. I don’t know how many people I’ve met over the years who have one income streams, maybe two income streams. The average US family today, in America, is three income streams. Usually Mom and Dad have an income stream, and then there’s usually some sort of seedy or money-market account that throw off pennies in interest. That’s usually their three income streams. They hope to get a few more by the time they retire. Well, we teach the importance of having many, many income streams. We have an Income University at our website where you can learn 22 different income streams and how to create them.
Some people have more time than money, and other people have more money than time, so some people may not be able to get all 22 income streams because they don’t have the ability, but if you have time, you can always trade it and receive money. If you have money, you can always take that and enhance its returns and do better as well. Some people will tell you they don’t have either, and those people usually have their priorities backwards. Some people will say that they have both, and that’s of course, a great place to be if you have both time and money. All 22 income streams cover all of those different situations, whether you have too much time and no money or a lot of money but not a lot of time. There’s plenty of things that everybody can do, and I think that oftentimes, we get so obsessed with trying to pay off debt – and I think that’s a good thing – but oftentimes we forget that we can add on new income streams.
Jason:
Yeah, and let me comment on the debt thing for just a moment, if I may. I know we’re kind of wrapping up here and we’ve been going for a while, but one of the things few people really understand deeply, and my listeners do because I’ve talked about it for so many prior episodes – it’s the idea that in an inflationary environment, and we both think we are going to see some significant inflation, debt actually transfers wealth from lenders to borrowers. Borrowers are actually enriched by debt because they pay the debt back in cheaper dollars. If you look at what happened in the Weimar Republic at the way that lenders and borrowers interacted together, you just see. When you put the debt against a commodity that has universal need, and my love is real estate – I love getting a 30-year mortgage, blow the rate of real inflation on low-priced real estate. That’s necessity housing, not luxury housing. I want it to throw of cash-flow the day I buy it.
Then, the debt is debased by inflation. I created a little trademark term and it’s a mouthful: inflation-induced debt-destruction. It’s just an amazing phenomenon; it’s like the hidden wealth creator. Then you have a commodity like precious metals – think of what little houses or apartment buildings are made of. They’re made of copper wire (a commodity), lumber, concrete, petroleum products, glass, steel. These are all things that are traded globally, not indexed to any one currency.
I just think that’s such a good equation. Have some metals and some other things and some preparedness too, of course. I wouldn’t totally rush to pay off debt unless it’s consumer debt. I like the mortgage debt because that’s being paid by someone else. I don’t pay my own real estate debt, my tenants do.
Jerry:
That’s a good strategy. We mention that too. The one caveat with that is to make sure that your audience or whoever follows that advice locks it in on a fixed interest rate.
Jason:
Oh, most definitely. Never adjustable rates, no way.
Jerry:
If you have an adjustable rate, it works against you, actually.
Jason:
Oh yeah, absolutely. You’re going to get payment shock when the inflation finally does hit and the rates go up, but who knows how long they’ll kick that can down the road. When you’re borrowing, I’d say real inflation now is always understated by the government. Real inflation, now, is probably 6-8%, in reality, although the government would have us believe it’s much lower. If you can borrow at 4.5% for 3 decades, if someone takes out that mortgage today, they’re not going to make the last payment – or I should say, their tenant’s not going to make the last payment until 2044. Do you know how much inflation we’ll probably see in the next 3 decades?
Jerry:
Oh sure!
Jason:
It’s insane!
Jerry:
And you know, Jason, I’m an economist, I do a lot of investing, I’m a real estate investor.
Jason:
I didn’t know that, I’m glad to hear that you like real estate.
Jerry:
Oh, sure. It’s one of our income streams that we love. We’ve built many different income streams and I love rental real estate. I love, as you said, that 30-year mortgage. I would take a 40- or a 50-year mortgage.
Jason:
Oh, I’d take a 200-year if I could.
Jerry:
I could go on like Dave Ramsay and other people who say ‘Don’t have any debt at all’, but we do like the whole concept of real estate. Many people today, as you well know, are very happy to borrow as much as they possibly can. Some of the wealthiest people I know are borrowing to the hilts at fixed interest rates.
Jason:
Oh yeah, and borrowing specifically against a commodity that has universal need, like housing.
Jerry:
Exactly.
Jason:
That’s a great deal, and of course, it’s the most tax-favored asset in America. We don’t even have time to go into that one, but taxes are the modern version of slavery. If you want to really lower your tax bill, own a lot of long-term buy-and-hold income property.
Jerry:
I agree.
Jason:
Just prudent, non-sexy, boring stuff in markets that don’t make the headlines. It’s not going to be Southern California. You want to own stuff in Texas and Georgia and Tennessee. These are great markets, we love them.
Jerry:
Well, many of the things that we teach over at our website include things like options trading for people who maybe want to do that, rental real estate for sure. We also talk about affiliate marketing. We have 22 different income streams, so anybody out there who’s just wanting to add another income stream on, that’s what we love to do. We’d love to help them.
Jason:
Good stuff. Really good. Jerry, give out your website again.
Jerry:
Yeah, it’s https://followthemoney.com/fivelevels/
Jason:
And just remember from the Nixon-Watergate days, deep-throat said ‘Follow the money’, so there you go. Good stuff. And the book is on Amazon with 4.5 stars and good reviews. Any closing thoughts?
Jerry:
I would just tell people to really keep their eyes open right now. I expect the market overall to probably do fairly well as we head into the year and into the next year; this is historically from the stock traders’ almanac and from all the investors and all the different cycles that we’ve studied, this is usually the best time to be in the market. It’s the third and fourth year of a Presidential candidacy and cycle. The third and fourth year are often great times to be in the market. We also offer, at our website, a market barometer. We were able to step aside and get out of the market before the collapse. I really do pride out system on catching that. I expect to see another major collapse. I don’t expect it to come within the next year – I think we’re still a couple of years out, but we don’t really guess at that. We have a system called the market barometer which has a great track record, going back all the way to the 1929 crash (we back-tested it). Maybe you have money in a 401(k) or an IRA and people say ‘I don’t want to sit through another one of these major collapses’. We have a market barometer that is available at our website that people should definitely check out.
Jason:
Jerry, I’ve got to say, I’m a little surprised that you’re a stock market fan. I call it the modern version of organized crime, and a conservative guy like you, I would think that you wouldn’t be too in favor of the stock market.
Jerry:
You know, the stock market has been really good to me because I’m a trend-trader. I trade with the trend, and so when the market goes down, I make money. When the market goes up, I also make money because I use options and I use inverse ETFs and leveraged ETFs. It’s been really good to me, so it doesn’t really matter what the market’s doing. I don’t really root for the market to go up, I just root for the market to move. If the market moves, I make money. When the market’s stagnant and kind of moves in a sideways motion, okay, you’re right and it’s probably a bad place to be. When it’s going up or down, I can’t complain and I like the market at that time.
Jason:
Good stuff. Well, Jerry Robinson, thank you so much for joining us today. The book, again, is Bankruptcy of Our Nation, so check it out on Amazon and all the usual places. I appreciate you joining us.
Jerry:
It was great to be here, thanks Jason.
Outro A:
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be.
Outro B:
Really? Well how is that possible at all?
Outro A:
Simple, Wall Street believes that real estate investors are dangerous to their schemes because the dirty truth about income property is that it actually works in real life.
Outro B:
I know. How many people do you know, not including insiders, who created wealth with stocks, bonds and mutual funds? Those options are for people who only want to pretend they’re getting ahead.
Outro A:
Stocks and other non-direct traded assets are a losing game for most people. The typical scenario is you make a little, you lose a little, and spin your wheels for decades.
Outro B:
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means, unless you’re one of them, you will not win.
Outro A:
And, unluckily for Wall Street, Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.
Outro B:
Yup, and that’s why Jason offers a one-book set on Creating Wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
Outro A:
We can pick local markets untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
Outro B:
I like how it teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.
Outro A:
And this set of advanced strategies for wealth creation is being offered for only $197.
Outro B:
To get your Creating Wealth Encyclopedia Book One, complete with over 20 hours of audio, go to www.JasonHartman.com/Store.
Outro A:
If you want to be able to sit back and collect checks every month, just like a banker, Jason’s Creating Wealth Encyclopedia series is for you.
Outro:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected]. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Empowered Investor Network Inc. exclusively.
